Namibia Faces N$4.6 Billion Annual Losses Due to Money Laundering, Bribery, and Tax Evasion

The Bank of Namibia (BoN) has revealed that Namibia loses an estimated N$4.6 billion annually through illicit financial flows (IFFs), including money laundering, bribery, and tax evasion (Global Financial Integrity, 2023).

##Completion of Pilot Project and Upcoming Report##

The BoN has recently completed a pilot project focused on defining, estimating, and sharing data regarding these unlawful financial outflows from the country. A report on the findings will soon be presented to the Cabinet for approval (BoN, 2023).

###Previous Estimates###

Previously, the think tank reported that illegal financial outflows from Namibia amounted to N$46.9 billion between 2009 and 2018 (Global Financial Integrity, 2020).

##Historical IFFs Data##

From 2004 to 2013, Namibia ranked 14th in Africa and 65th globally for IFFs, averaging approximately N$17.7 billion per year, with a cumulative total of N$177.7 billion (Global Financial Integrity, 2021).

##Financial Action Task Force (FATF) Scrutiny##

The increased scrutiny from the Financial Action Task Force (FATF) has drawn attention to Namibia’s weaknesses in its anti-money laundering and counter-terrorism financing efforts. The country was identified as having these vulnerabilities, potentially leading to financial sanctions that could negatively impact foreign direct investment, capital flows, and escalate compliance costs.

##Legislation to Comply with UN Conventions##

In response to this situation, parliament passed several urgently tabled bills, including the Police Amendment Bill, Criminal Procedure Amendment Bill, Prevention of Organized Crime Bill, Extradition Amendment Bill, and International Cooperation in Criminal Matters Amendment Bill, among others, to comply with the United Nations Convention against Transnational Organized Crime, Anti-Money Laundering, and Combating the Financing of Terrorism and Proliferation by October 2023. Failure to comply may result in Namibia being greylisted by the FATF.

##Concerns and Recommendations##

PDM leader McHenry Venaani raised concerns about the financial impact of these illicit transactions, referring to the diversion of profits into low-tax jurisdictions as a significant threat to Namibia’s financial health. He urged stricter compliance and regulation mechanisms, emphasizing transparency in international tax cooperation and considering modern technologies to improve tax detection and discourage financial crimes.

Independent researcher Josef Sheehama also shared similar concerns and suggested addressing Namibia’s financial instruments and the potential consequences of potential financial sanctions. Given the Fishrot corruption scandal, Namibia now faces scrutiny by the International Cooperation Review Group over its domestic anti-money laundering regime.

##Impact on African Economies##

African countries are collectively losing more than US$84 billion annually to IFFs (Global Financial Integrity, 2021). Corporations and government officials, both local and international, have been identified as the primary channels for these illicit transactions, making the fight against money laundering and financial crimes especially challenging.